Jet.Ai and Wheels Up: A tale of two stocks
Mike Winston discovered one of the great secrets of the capital markets two weeks ago. As Jet.AI Aviation, the Las Vegas operator and technology company he founded, listed on the NASDAQ, Winston discovered that the button to ring the bell is not actually connected to anything. Everyone knows ringing the bell to start the market is purely ceremonial, but he laughed when he found out just how ceremonial it is, seconds before the market opened.
Jet.Ai listed by merging with Oxbridge Acquisition Corp, a Special Purpose Acquisition Company (SPAC) becoming the second business jet services company listed in New York. A few blocks across Manhattan, Wheels Up and its advisers – investment bank Jefferies and law firm Kirkland & Ellis – were busy trying to secure the future of the first. Last Wednesday they announced a deal that brings in $500m of debt for 95% of the company.
Wheels Up’s listing in 2021 gave its large institutional investors a chance to free up their investments. Jet.AI’s gave its crowd funders a chance to do the same thing. “The driving force behind the SPAC deal was to bring liquidity to our 32,000 investors and to allow the company enhanced access to capital for growth,” says Winston.
Jet.Ai is more of a software company than a business jet operator. It has a fleet of four HondaJets and also has five Challenger 3500s on order. Winston says it uses these to inform its software business. It tries not to own the aircraft by selling fractional shares and they are all operated by Las Vegas operator Cirrus Aviation.
It definitely has some innovative technology. A few weeks ago, it soft-launched CharterGPT, which allows customers to book charter using artificial intelligence. It also has a new product to help operators off-set carbon emissions and one that automatically prices yields for diverting empty legs.
With Flight Club it wants to allow operators to sell shared flights. “The software sends the booking and files to the DOT [Department of Transportation] automatically and then you have to set up an escrow which we help with. Once you have done that you can sell by the seat,” says Winston. Jet.AI has already used this working with Cirrus Aviation and the Vegas Golden Knights ice hockey team. It is also planning to offer technology allowing small operators to create their own jet cards.
Unlike Wheels Up, Winston does not want to buy operators and consolidate business aviation. He wants to help the 2,350 Part 135 charter operators in the US use technology to become more efficient. Especially the 80% who have fewer than 10 aircraft. The listing is about raising money to fund this technology. The merger between Jet.AI and the SPAC was originally valued at $45m, but Jet.AI’s first week has been tough. It listed at $10 a share. They were trading at $4 before the market opened today.
Wheels Up also listed at $10. Despite its ticker symbol of UP, on Friday it was $1.45. This is up $0.45 after Delta Air Lines and a fund run by Certares and Knighthead agreed to lend $500m to Wheels Up. Wheels Up will issue new stock to the three giving them 95% of the company. The CK Opportunities Fund 1 will lend $400m, with Delta providing a $100m loan.
The investors hope that this $500m – and the $151m in cash it had at the end of June – will be enough to get it to 2024 when it hopes to be cash flow positive – and have a positive adjusted EBITDA.
The three investors are happy with these projections. Certares focuses on investing in travel and hospitality and Knighthead has a strong restructuring focus. Together they took car hire firm Hertz Global Holdings out of bankruptcy in 2021.
Delta and Ed Bastian, its highly regarded CEO, are committed to Wheels Up. They already owned 20% after merging Delta Private Jets with the company in 2020. Bastian believes that in the long-term Delta will have a big advantage in being able to sell private aviation to its customers. This is not a new theory for the airline. It launched Delta AirElite in 1984 and expanded this in 2010 when it acquired Seagrave Aviation from Jim Seagrave. (He is working on taking flyExclusive, his next company, public). Bastian believes Wheels Up is the best way for his airline to access business aviation.
“The partnership will create new opportunities for Wheels Up to drive strategic, operational and financial improvements for its customers in the months and years ahead,” said Bastian this week. “Delta’s unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares’ and Knighthead’s experience and global reach, are expected to speed Wheels Up on its path to profitability.”
Dan Janki, Delta’s CFO, has been appointed chair of Wheels Up.
Bastian is also a huge supporter of Kenny Dichter, Wheels Up’s founder, who stepped down as CEO in May but is still a strategic adviser to the company. “I would like to extend my sincere gratitude to Kenny Dichter, the visionary founder behind Wheels Up, for building the Wheels Up brand into a powerhouse in private aviation,” said Bastian this week. You could easily see Dichter coming back to Wheels Up with a more formal role – especially when growth becomes the focus again.
If Bastian’s bets are right: that Delta, Certares and Knighthead can get the company to profit by the end of next year and drive profits at his airline, you can expect to see other major carriers invest in business aviation. He will have secured his legacy as one of the greatest airline CEOs ever.
The bell for round two in Wheels Up’s stockmarket history has just rung.
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